Gold and Silver

Arguments for lower prices:

• Gold still in well defined downtrend as the monthly MACD indicator is still in sell mode.

• The door towards US$1,050.00 still is wide open because Gold broke through important support around US$1,530.00.

• If US$1,265.00 - US$1,250.00 does not hold we should see another challenge of support around US$1,200.00. If US$1,200.00 does not hold we should see another wave of selling pushing Gold down to US$1,050.00 in a final wave of capitulation.

• Investors still moving out of Gold ETFs. The SPDR Gold Shares Fund (GLD) is now holding only 939.07 tonnes of Gold. More than 400 tonnes of "paper" Gold have been sold since beginning of this year. No trend change so far.

• The indian goverment is blaming gold imports as being responsible for the current account deficits. The finance ministry just increased customs duties by 2%. In june Indian gold imports fell heavily down to only 28 tonnes. The restrictions on overseas purchases by banks on a consignment basis had already been expanded to include state-run trading companies and others authorized to directly import gold.

• France has banned precious metal transactions within, to, or from the country by all forms of mail.

• Risks of a hard landing for China are growing. This would unleash huge deflationary forces.

• In case the "risk off" trade returns precious metals could suffer initially.

Arguments for higher prices:

• Gold is below monthly bollinger band (US$1,307.57)! This type of situation typically can not last much longer.

• Gold was able to create first series of higher lows (US$1,180.00 / US$1,210.00) and higher highs (US$1,268.00 / US$1,298.00).

• With the successfull breakout above US$1,265.00, Gold completed an ascending triangle pattern, now targeting US$1,350.00.

• Theoretical upside potential now at least until 50-MA (US$1,352.58), upper bollinger band (US$1,367.67) and the next descending trendline (around US$1,350.00).

• New "MACD" buy signal on the daily chart.

• Weekly "slow stochastic" indicator about to loose "embedded status" (=both signallines below 20) and now moving to oversold.

• Goldmining index HUI recently with two strong updays, each with gains above 7.8%.

• DowJones/Gold Ratio with more and more negative divergences. This points to a trend change in favor for gold with negative consequences for stockmarkets.

• Recent underperformance of silver has not been confirmed by the indicators on my Gold/Silver ratio-chart. These negative divergences pointing towards a trend change as well. As soon as silver outperforms gold the precious metals sector will be in a new uptrend.

• Continuous Commodity Index oversold. Many commodities are now trading at or even below production costs.

• The latest Commitments of Traders report (CoT) for gold improved again. Commercials currently holding the lowest shortposition in over 12 years. The major "too big to fail" Fed-Primary-Dealer and Bullion Banks have now fully gotten themselves out from under what had been an extraordinarily wrong-footed net short position of over 146,000 contracts last autumn. They are now net long more than 45,000 contracts! That flip of 191,000 contracts took place while price declined by 30% from $1,795.00 to US$1,180.00 and represents a change of position equaling over 595 metric tonnes.

• The latest sentiment data showed another large decline in public opinion towards precious metals. In a bear-market extreme sentiment levels for metals can usually reach opinion levels between 10% - 20%. We have reached that level in gold in silver recently.

• Mainstream media ignoring Gold´s recent 120.00US$ recovery.

• Low retail demand while Gold may be bottoming is bullish. A contrarian investor wants to see high retail demand at market tops and low retail demand at market bottoms. Because retail money is not smart money.

• Saisonal cycle from july until end of september extremely positive for gold.

• Euro crisis is just about to hit the headlines again as Greece needs more money, Portugal faces new political upheavals, Italy's credit rating has been cut down to BBB with negative outlook and in Spain the absurd party financing and corruption scandal is getting bigger and bigger.

Conclusion:

• After correting from US$1,795.00 down to US$1,180.00 Gold is now extremely oversold and at least technically ready for a bounce. The price movements since end of june favor a bottoming process. A daily close above US$1,300.00 would be a first confirmation although I expect US$1,320.00 - US$1,350.00 to be extremely strong resistance. Gold will not be able to break through this zone immediately. After mid of august it will be possible. Before that I expect a volatile consolidation and bottoming process between US$1,250.00 and US$1,340.00

• During the next couple of days I expect huge volatility as Ben Bernanke will drive the markets crazy with his statements regarding QE. This could open up another chance to enter precious metals positions at much lower prices.

• As already written a daily close below US$1.250.00 is a huge warning sign that the correction still is not over.

Longterm

• Nothing has changed

• Precious Metals bullmarket continues and is moving step by step closer to the final parabolic phase (could start in summer 2014 & last for 2-3 years or maybe later)

• Price target DowJones/Gold Ratio ca. 1:1

• Price target Gold/Silver Ratio ca. 10:1

• Fundamentally, Gold is still in 2nd phase of this long term bullmarket. 1st stage saw the miners closing their hedgebooks, 2nd stage is continously presenting us news about institutions and central banks buying or repatriating gold. 3rd and finally parabolic stage will bring the distribution to small unexperienced new investors who then will be acting in blind panic.